Compensation Costs in
Private Industry

March 1987 to March 1999

Total private-sector compensation costs in March 1999
were $19.00 per hour worked, up from $13.42 in 1987.
Since March 1987, total private-sector compensation costs
have increased at an average annual rate of 2.9 percent,
according to data from the U.S. Bureau of Labor
Statistics (BLS).

The costs of private-sector employee benefits increased
at an average annual rate of 3.0 percent from March 1987
to March 1999. In March 1987, benefit costs were $3.60
per hour worked, or 26.8 percent of total compensation,
and by March 1994, they had risen to 28.9 percent of
compensation. In March 1999, benefit costs were $5.13 per
hour worked, and had declined to 27.0 percent of total
compensation.

One of the major causes of this decline in benefit costs
as a percentage of total private-sector compensation
costs is the decline in insurance costs. Insurance costs
increased steadily from March 1987 ($0.72 per hour
worked) to March 1994 ($1.23 per hour worked). By March
1999, insurance costs had declined to $1.13 per hour
worked.

Legally required benefits (Social Security, federal and
state unemployment, and workers' compensation) have
always been the highest-cost benefits to private-sector
employers. Legally required benefits accounted for 8.4
percent of total compensation costs ($1.13 per hour
worked) in March 1987, and increased to 9.4 percent of
total compensation costs ($1.60 per hour worked) by March
1994. Like insurance benefits, legally required benefits
declined as a percentage of total compensation costs by
March 1999, representing 8.7 percent of total
compensation ($1.65 per hour worked).

March 1996 was the first time that BLS reported separate
cost data for Medicare and Social Security (the Old-Age
and Survivors and Disability Insurance program, or
OASDI). That month, the OASDI cost to private-sector
employers was $0.84 per hour worked (or 4.8 percent of
total compensation), while the Medicare cost was $0.21
per hour worked (or 1.2 percent of total compensation).
By March 1999, the costs of these benefits as a
percentage of total compensation costs had not changed,
but the dollar costs had increased to $0.93 per hour
worked for OASDI and $0.23 per hour worked for Medicare.
The major characteristics affecting employers' total
compensation costs are establishment size, industry,
occupation group, union status, and work status:

Large establishments have higher total compensation
costs than small establishments. Total compensation costs in
establishments with fewer than 100 employees amounted to
$16.27 per hour worked in March 1999, compared with $26.37
per hour worked for establishments with 500 or more
employees.

White-collar occupations have the highest total
compensation costs ($23.02 per hour worked), compared with
blue-collar occupations ($17.98 per hour worked) and service
occupations ($9.58 per hour worked).

Total compensation costs were higher for union
workers ($24.75 per hour worked) than for nonunion workers
($18.20 per hour worked).

Total compensation costs were higher for full-time
workers ($21.55 per hour worked) than for part-time workers
($10.20 per hour worked).